Financial Dictionary

4% Rule Definition Planning for retirement and knowing exactly how much you need to save can be tricky. The 4% rule is a great tool to use to ensure you’re on track to meeting your retirement goals. Where Did The 4% Rule Come From? The 4% rule is based on a study that analyzed historical market returns to determine a realistic and sustainable withdrawal rate over a 30-year retirement period. Financial planner William Bengen popularized the rule that if you withdraw 4% of your retirement savings

What Are Magnificent 7 Stocks? The term "Magnificent 7" refers to seven dominant companies, primarily in the tech sector, that currently play a significant role in shaping the stock market. These stocks are pivotal to market indices and represent some of the most innovative and valuable firms globally. What Stocks Make up The Magnificent 7? The Magnificent 7 stocks are seven of the largest, most influential, and high-growth companies in the world, typically including Apple (AAPL), Mic

What is Non-Qualified Deferred Compensation (NQDC)? Non-Qualified Deferred Compensation (NQDC) plans are an option offered by some employers that allow high-earning employees to defer a portion of their income until a later date, usually at retirement. Unlike qualified plans, like a 401(k), NQDCs are less regulated by the IRS and can be tailored to the needs of applicable employees. Because they do not have to follow strict ERISA guidelines, NQDC plans can exceed contribution limits typically i

What Is a Cash Balance Pension Plan A cash balance pension plan is a type of employer-sponsored retirement plan that combines features of a traditional defined benefit plan, and a defined contribution plan. In a cash balance plan, the employer sets aside a predetermined amount of money for each employee, usually a percentage of their annual salary, and the account grows over time with interest. Learn more about retirement plans for self-employed individuals here. Benefits of a Cash Balance

What is An Equity Partner An equity partner is an individual who holds an ownership stake in a business, with the most prominent example being a law firm. Equity partners have financial interest in the success of the firm because they share in the annual profits and losses, based on the equity percentage they own. Equity partners are also typically involved in the management and decision-making processes and may have a say in the strategic direction of the company. Equity partners will usually

What Is a Hedge Fund? A hedge fund is a pool of money from both established individuals and large organizations, which is controlled by a hedge fund manager. The hedge fund manager uses various strategies with the goal of generating high returns on the capital.  { "@context": "https://schema.org", "@type": "DefinedTerm", "@id": "DefinedTerm", "name": "Hedge Fund", "description": "A hedge fund is a pool of money from both established individuals and large organizations, which is

Growth Fund Definition A growth fund is an investment vehicle, typically offered by mutual fund corporations or Exchange-Traded Fund (ETF) providers, that primarily invests in equities poised for above-average earnings growth and share price appreciation. The primary objective of a growth fund is capital appreciation by channeling investments into companies projected to experience exponential growth. Large Cap or Blue Chip Growth Funds Large cap growth funds specialize in investing in large cap

What Is Amortization? Amortization is an accounting technique that involves spreading out the cost of a debt over a period of time by repaying the debts in installments. Amortization involves allocating the cost of the debt in a systematic manner, both for accurate financial reporting and better planning of expenses. Amortization schedules are used by lenders, such as financial institutions, to produce a loan repayment schedule based on a specific maturity date. { "@context": "https://schema

What Is Compound Interest? Compound interest is the interest on savings calculated on both the initial principal and the interest accumulated from previous periods. For example, if you make a $1,000 initial investment into a savings account with a 5% interest rate, at the end of the first year that $1,000 investment would accumulate $50 in interest, for a total of $1,050. The next year, you’ll earn 5% interest on $1,050 which is $52.50. Each year, your interest will grow without having to make

What is NASDAQ? The NASDAQ refers to the Nasdaq Composite, an index listed on the NASDAQ stock exchange, where you can buy and sell stocks or shares of publicly traded companies. The NASDAQ is distinct because of its heavy weight towards the technology sector, featuring giants like Apple, Facebook, Tesla, and Google. Technology stocks account for over 50% of the Nasdaq Composite’s index weight. These types of stocks tend to be more volatile than stocks in other index funds that may be more dive

What is a Certificate of Deposit? A certificate of deposit, or a CD, COD, or Time Account, is a savings account that earns interest from the issuing bank over a fixed period. Since the money cannot be withdrawn without a fee or penalty, banks typically offer a predetermined rate of interest, which is generally higher than a typical savings account. { "@context": "https://schema.org", "@type": "DefinedTerm", "@id": "DefinedTerm", "name": "Certificates of Deposit (CDs)", "description":

What is CPI? The Consumer Price Index, or CPI, is the measure of the monthly change in prices that consumers are paying for goods and services. Some of the goods and services measured in the CPI include, food, housing, transportation, and healthcare, among others. The CPI is used as an indicator of inflation or deflation in the economy. { "@context": "https://schema.org", "@type": "DefinedTerm", "@id": "DefinedTerm", "name": "Consumer Price Index (CPI)", "description": "The Consumer